Pension Funding A Factor In Rock Island's Credit Downgrade

Jun 26, 2017

The City of Rock Island's credit rating is getting worse. 

Moody's Investors Service downgraded Rock Island's credit rating to A1 from Aa3, meaning the city has upper-medium grade credit rather than high quality credit.
Credit Moody's Investors Service

Moody's Investors Service has downgraded the city's rating for the second time in less than a year. 

That means the city will have to pay higher interest rates on general obligation bonds, which pay for things like improvements to infrastructure. 

Current interest rates run at about 3 percent. 

City Manager Randy Tweet says he expected the downgrade, and thinks it's because the city is behind in funding police and fire pensions.

"The police and fire pensions took a big hit in the recession in 2008 and 2009, as everyone's investment did, so that's really what put everyone behind," he said. 

The city currently funds pensions at about 35 percent, instead of the 90 percent the state requires. Tweet says there's a plan in place to fund pensions at 100 percent by 2041.

The city council is currently considering changes to the way pensions are funded and, if approved, that would help increase the city's credit rating and keep it on track to fund pensions fully by 2041, according to Tweet.

Rock Island now has the fifth instead of the fourth highest credit rating on Moody's scale. It's still five levels away from junk status.

Bettendorf has the highest rating in the Quad Cities, followed by Moline and Davenport, then Rock Island. 

Rock Island was downgraded to an A1 from an Aa3 credit rating, meaning the city has upper-medium grade credit rather than high quality credit.